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What is a Jumbo Loan?

A jumbo loan, also known as a jumbo mortgage, is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHA). Unlike conventional mortgages, a jumbo loan is not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac.

The value of a jumbo mortgage varies by state—and even by county. The FHA sets the conforming loan limit size for different areas on an annual basis, though it changes infrequently.

In Colorado a Jumbo Loan is normally a loan amount greater than $575,000 in Adams, Arapahoe, Broomfield, Denver, Douglas, and Jefferson Counties. Greater than $644,000 in Boulder County. Greater than $510,400 in Weld, El Paso, and Larimer Counties.

Underwriting requirements for Jumbo Loans are more stringent than conventional loans.

Qualifying for Jumbo Mortgages

As with any loan, you’ll need to meet the approval criteria, and jumbo home loans are more difficult than conventional home loans to qualify for. The loan amounts are higher, so lenders are more selective due to the increased risk of this loan type.

Credit History: You’ll need good credit history to get approved for a jumbo. A FICO score above 680 is a minimum for most buyers.

Down Payment: Jumbo loans typically require down payments of 5% to 20% percent. To qualify for a jumbo loan with a small down payment, you’ll need good credit, strong income, or significant bank reserves.

Income and Assets: Jumbo lenders require documentation to prove that you have sufficient income and assets to afford the property you’re buying. Lenders like to see bank reserves available to cover payments for six to 12 months.

Debt-to-Income Ratio: A low debt-to-income ratio is always helpful when applying for jumbo loans. Lenders commonly use 43 percent as a target, but that number varies from lender to lender.

Jumbo loans are not designed to help borrowers “stretch” and buy more house than they can afford. Instead, they’re for financially secure borrowers buying homes that are more expensive than average.